Juul Sales To Cease In San Francisco After Voters Uphold Vaping Ban

A vaping ban in Juul Labs’s hometown comfortably survived an election day vote on Tuesday, making San Francisco the first major U.S. city to prohibit all e-cigarette sales. The ban, effective January, is a major blow to Juul, which spent $15.7 million on a campaign to stop the ban before abandoning all efforts in September amid intense scrutiny of the vaping industry.

Juul devised Proposition C over the summer after city legislators unanimously approved the ban. The ballot measure from the e-cigarette company—which holds more than 70% of the U.S. e-cigarette market, according to Nielsen—would walk back restrictions against the sale and manufacturing of vaping products before they take effect.

But voters rejected Prop C in a lopsided 81% to 19% vote, upholding a ban that extends to all vaping products, flavored and otherwise. The legislation forces products off the market until they receive approval from the Food and Drug Administration. In July, Juul and its competitors were given a May 2020 deadline to submit applications for approval. Products not approved by the FDA would be removed from the market nationwide.

Juul poured substantial resources into efforts to quash the ban, making its campaign the second most expensive in San Francisco history. But a cascade of negative attention centered on Juul’s role in the rise of youth vaping has pushed the company to reverse course. A Centers for Disease Control and Prevention survey in September found that 27.5% of high schoolers used e-cigarettes, up from 11.7% two years ago.

In recent months, Juul has been the subject of a growing pile of lawsuits, plus investigations from the Federal Trade Commission, FDA and multiple states’ attorney general’s offices. A bout of vaping-related illness—named “EVALI” by the CDC—prompted the Trump administration to begin drafting federal legislation. The White House is expected to announce a ban on certain flavored products this week, according to The Wall Street Journal.

The crisis led to the departure of several key executives at Juul, including CEO Kevin Burns. K.C. Crosthwaite, a former executive at Altria, which owns a 35% stake in Juul, took over and immediately announced the suspension of all marketing efforts. Although a spokesperson for the Juul-backed coalition told Forbes that “Juul could not shut down this campaign if they wanted to,” Crosthwaite announced days later that Juul would stop supporting the ballot measure. Company spokesperson Ted Kwong decline to comment on the results of Tuesday’s vote, instead referring Forbes to Crosthwaite’s announcement.

“The San Francisco vote gives a powerful boost to growing efforts around the country to end the sale of all flavored tobacco products,” said Matthew Myers, president of Tobacco-Free Kids Action Fund, in a statement. His organization was part of a coalition of public health groups that backed the “No on C” campaign.

Billionaire Michael Bloomberg bankrolled its efforts, contributing $6.6 million of the $7.3 million received by the “No on C” campaign. The former New York mayor, worth an estimated $52.5 billion according to Forbes’ Real Time Billionaire rankings, has been an active donor in Bay Area politics, giving multimillion-dollar contributions to a 2018 campaign to ban flavored vaping products in San Francisco and a 2016 campaign to increase soda taxes in San Francisco and Oakland.

The ban is unlikely to have a material effect on e-cigarette sales, said Cowen analyst Vivien Azer, noting that consumers can buy products in nearby cities. “The biggest negative for the e-vapor category today is EVALI, as health concerns around vaping drove an 18% month over month decline in e-vapor sales, in Nielsen-tracked channels,” she noted. EVALI has resulted in at least 37 deaths and more than 1,800 injury cases, according to the CDC.

The ban’s victory could usher in similar legislation elsewhere. Last year, San Francisco became a pioneer in e-cigarette legislation when voters approved a ban on flavored vaping products in a 68% to 32% vote. A number of states and localities have since followed suit, catalyzed by the proliferation of EVALI incidents. In September, Massachusetts mirrored San Francisco by implementing a four-month ban on all vaping products.